Why the Tax Bill's Errors Won't Be Fixed

(Bloomberg View) -- The rush to pass the Republican tax bill in record time is inevitably leading to flat-out mistakes that have serious consequences. In fact, House Ways and Means Chair Kevin Brady is already saying that a second bill will be needed to make up for the problem. There's a good chance those mistakes will prove impossible to fix.

The problems themselves are apt to be numerous, and in some cases potentially severe. Last week, for instance, analysts realized that the Senate version of the bill, which restored the corporate alternative minimum tax set at the same level as the new regular corporate tax rate, would kill off the research and development tax credit and other corporate tax credits. In theory, there's an argument in favor of that approach -- after all, the idea of tax reform is to rid the code of favorable treatments and policy incentives in return for lower overall rates. In practice, the Senate seems to have decimated the credits by accident, outraging the business community.

Further examination of the legislation has revealed some flat-out weird marginal rate spikes, including marginal rates over 100 percent for some business owners, and 85 percent in other cases. Again, none of this was intended; it's just what happened when separate provisions were added at the last minute without considering the overall effect of the resulting legislation.

Odds are that's just the tip of the iceberg.

Errors are basically unavoidable in major legislation. Even if the initial committee draft was perfect, there's no quality control on often highly technical amendments that get offered and accepted, or procedure to prevent different provisions from interacting in odd ways. The final stages of most legislation includes last-minute deals -- to win votes, or to adjust spending or revenue estimates in order to achieve some goal. And that introduces more mistakes.

For example, one 1987 article about the much-lauded 1986 tax reform act referred to "the hundreds of mostly minor drafting errors in the 1986 act - with more being found each week." It's not clear whether tax legislation in particular is more prone to this problem than other measures, but what is certain is that from the day these bills are passed an army of tax lawyers start looking for anything they can exploit, so any mistakes in tax bills are probably more likely to matter than in any other laws. 

And if "hundreds" of errors can be made in even a well-crafted bill, just imagine how many mistakes, with potentially egregious consequences, can come out of the slapdash process that's generating the current Republican tax bill. This could get very, very ugly.

There used to be a fairly simply remedy, the one Brady is now promising: Congress would pass a "technical corrections" bill to fix drafting errors and put the law back on the path that Congress intended. That same 1987 article referred to this as "routine." When Congress worked properly, even contentious bills could be corrected without too much fuss.

No longer. After Democrats passed the Affordable Care Act on party-line votes in 2009 and 2010, Republicans used the filibuster to prevent any technical corrections bill from passing. Indeed, the outcome was so certain that Democrats never bothered to try.

The two-pronged Republican strategy included both finding weak spots in the law that they could use to attempt to overturn the entire thing in court, and keeping the law unpopular by making sure it didn't function properly. That the latter meant deliberate harm to the nation in order to achieve long-term political goals, something previously associated only with extreme leftists, didn't bother Tea Party radicals at all.

Democrats could still allow a technical corrections bill to fix whatever winds up wrong with the Republican tax bill to pass -- that is, they could refrain from filibustering it even if they oppose it. I think that's what they should do, as long as any Republican-written bill in 2018 contains no new policy changes. I doubt they will see it that way. Pure desire for revenge might be enough to spark a filibuster. But even without that, they may well feel that allowing Republicans to fix their mistakes while those same Republicans prevented Democrats from fixing their own would be a form of rewarding malfeasance and encouraging a future uneven playing field.

It may not matter anyway. Republicans may well find it impossible anyway to round up enough of their own votes to pass legislative fixes for problems caused by the tax bill. After all, if tax lawyers find loopholes that taxpayers can exploit, then closing those loopholes might be considered a tax increase. A lot of Republicans might hesitate to vote for that kind of tax increase, even if it just restored the law to what they thought they were passing in the first place. What's more, many congressional Republicans and the interest groups who support them would likely see the re-opening the tax code as an opportunity to win provisions that were fought out in originally passing it (that is, provisions that are being fought out right now in the conference committee).

Bottom line: Don't expect a dysfunctional congressional Republican Party to fix mistakes next year caused by a dysfunctional Republican Party this year. And whether they should or not, don't expect congressional Democrats to bail out Republicans. In other words: We may be stuck with whatever mess Republicans are making right now for a long time. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Jonathan Bernstein is a Bloomberg View columnist. He taught political science at the University of Texas at San Antonio and DePauw University and wrote A Plain Blog About Politics.

  1. Recall that Democrats passed the original bill by defeating a Republican filibuster, but that their supermajority disappeared after the election of Republican Scott Brown in January so Democrats couldn't just pass a corrections bill over a unified Republican filibuster. 

  2. The original tax bill is protected against filibusters because of the reconciliation procedure under which it is being considered, but a technical corrections bill would be vulnerable to a filibuster and need votes to defeat one. 

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